Do everything you can to survive your learning curve and to ensure that you can support yourself financially (and emotionally) through your learning curve. Trade in simulation mode before you put money at risk, trade one lots before you trade larger size. Make your mistakes when your exposure is lowest. If you can break even after trading costs/expenses, you’re doing very well. Don’t push the curve or you’ll find yourself deep in a hole.
Archives of “money” tag
rssNicolas Darvas Quotes
Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.” (more…)
Ten Ingredients to become A Great Trader
It is all a game of risk management, mind, and a robust system. Everything else is just noise.
- Passion for trading, only passion can fuel the work ethic needed to do the hard work that leads to success.
- Goal oriented traders succeed, if you know why you are trading and where it leads you may just get there.
- Perseverance: It is hard to lose if you never quit.
- Resiliency: The ability to come back from losses may be the secret to trading success.
- Back testing systems and methods before trading them speeds up the learning curve and side steps a lot of learning through real losses. (more…)
Trading, Gambling, Praying
Intuition is not free
If you are thinking about exiting, it is too late. You are praying at that point. If it is in your plan for your targets to get hit, up or down, continue what you are doing. If you are just hoping your stop does not get hit, on behalf of the market, thank you. I am making the assumption that those who post or say that their stop is going to get hit have discretion in their system. The problem is not this trade it is the hundreds or thousands you will take after that. There is a reason you wanted to get it, that is intuition. If you cannot afford to not make money on a trade, you are fucked anyways.
You lost the lesson too
The market is constantly giving feedback. What happens after the “my stop is going to get hit” statement? What if the market goes in your direction? Are you going to get out at breakeven? Let it run? Take a small lost/gain? What are you going to do next time? The time after that? The outcome will affect your decision. The outcome you remember best will be the one that gives you the best psychological reward not financial rewards. Trading is about answers, not questions. Unanswered question impedes reactions and forces decisions. Decisions are bad over the long term.
Get out already (more…)
TRADING DISCOMFORT
Causes of Trading Discomfort
Discomfort in trading usually comes in two forms and both have micro and macro causes.
Monetary Discomfort – Just like it sounds, this is where you are uncomfortable because you are losing money.
This can happen simply because you have a position with an open loss that is beyond your comfort level, or it can have more a more complex genesis.
Are you down big for the year in your trading account? Are you in financial trouble in your regular life? Is the mortgage payment coming due and your trading profits are the funds you have to use to pay it?
Control Discomfort – This where you feel discomfort not because of the monetary loss, but because the trade is “not doing what it is supposed to.”
This could be the result of a choppy day where every trade you attempt, no matter long or short, reverses against you.
Or once again it could be a related to larger issue. Are you the type of person that always needs to be in control in your life? Do you have an obsession with always being “right?” Is the world a place that would be better off if it listened to your opinions DAMMIT? (more…)
Mark Douglas :Quotes
page 121
1) Anything can happen
2) You don’t need to know what is going to happen next in order to make money.
3) There is a random distribution between the wins and losses for any given set of variables that define an edge.
4) An edge is nothing more than an indication of a higher probability of one thing happining over another.
5) Every moment in the market is unique.
Page 185
I AM A CONSISTENT WINNER BECAUSE:
1) I objectively indentify my edges.
2) I predefine the risk of every trade.
3) I completely accept the risk or I am willing to let go of the trade.
4) I act on my edges without reservation or hesitation.
5) I pay myself as the market makes money available to me.
6) I continually monitor my susceptibility for making errors.
7) I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.
Markets are changing all the time
You have to have the ability to change and see how the markets are changing and adapt to it. That’s a constant process. That’s why I think you see some people do well for four or five years and then just disappear.
History can be a useful benchmark but only if everything is put into the right context. Markets are dynamic and people’s reactions are different. It is much more subtle and nuanced than looking at what happened the last time.
No setup works all the time and in all types of market environment. The success rate of any setup fluctuates in cycles – there are periods when it is high and periods when it is low. Most successful speculators have specialized in a small number of setups. The question is, do you change when the market dynamics change and do you adapt new setups or do you wait for the proper market environment to come back before you risk any money?
Why do only 5% of the traders who day-trade end up successful?
Two reasons – #1) Many just want an indicator that is going to reveal the market to them and it is too competitive for that to work.
#2) The vast majority don’t approach the challenge in a way that will work. To a large degree, this isn’t the trader’s fault because most do what they have been taught by scores of “experts”.
Here is what will work. Guaranteed.
1. Never forget that the only thing you want to do is predict that others will buy higher or sell lower in your timeframe.
2. Settle on a strategy (and set of tactics) that suits your personality and thinking patterns.
3. Plan to use your judgment in the midst of making decision and entering trades! You are not a robot and you will never become one. Your brain is going to kick-in with its built-in facility for decision making in uncertain situations. In other words, you won’t be able to stop it from making judgments and compelling you to act so… work with it.
4. Learn to optimize that judgment through simplicity, practice, keeping records and knowing your feelings and emotions.
5. Manage your Psychological Capital (Mental Energy) more carefully than you manage your trades.
The money will follow. Your brain will work, your pattern recognition will work and your plan (a realistic one) will indeed be realized.
A Bad Teacher
The market often rewards bad behavior. You exit a stock because your stop is hit. You are okay with this because you followed your plan. The market then immediately reverses. You begin to think, “If only I stayed with the position.” The next time the market goes against you, you decide you are not going to get tricked again. This time though, the market does not reverse and what started out as a small manageable loss is now huge. The market will give you loss after loss forcing you to abandon a methodology right before it takes off without you. On the flip side, the market will lull you into a false sense of confidence. You trade larger and larger, taking on excessive risk. You print money until your risks become so excessive that one or two bad trades wipe you out. Learn from the market, but realize that sometimes it can be a lousy instructor. |
The Top Ten Similiarities of Winning Traders
You can read trading, books until you are red-eyed, you can spend thousands of dollars on seminars, you can try to get successful traders to give you the secret sauce of trading or the Holy Grail. But, in the end it is simply you versus the markets. You have to pick your system, your risk tolerance, and take the heat in your own account, it will be your own money you lose.
No one can tell you the right system and method for you. If you can take draw downs in equity mixed with long term capital growth then trend following may be for you. If you love playing the hottest stocks in the market then CAN-SLIM or the Darvas System may be the right systems for you. If you just have little patience and love action then you can join the few who have mastered day trading. There really is no right system for everyone, it depends on what you can handle. However here is what all winning traders must have to win in the markets regardless of time frame and system:
Trading System
- They trade a robust system or method that wins more money over time than it loses.
- Their system gives them a reward to risk ratio that is in their favor.
- Their system or method is proven to work with a live trading record over many markets and trades or has historical back testing. (more…)